Local Real Estate Agent and Former Account Executive of a Lending Institution Sentenced to Prison for Conspiring to Commit a Massive Mortgage Fraud

SAN DIEGO—A husband and wife were sentenced today to more than three years in prison for directing a multi-million-dollar mortgage fraud scheme that resulted in more than $10 million in bank losses, plus scores of foreclosures that contributed to the nation's financial meltdown in the mid-2000s.

Eric Elegado, a prominent San Diego real estate agent, and his wife, Charmagne Elegado, a former account executive of New Century Mortgage, a mortgage lending institution, were sentenced by U.S. District Judge Anthony J. Battaglia to 41 months each. A restitution hearing was set for May 27, and the couple was ordered to surrender to the Bureau of Prisons at that time. The government is seeking more than $10 million in restitution.

During today's hearing, Assistant U.S. Attorneys Joseph Orabona and Stacey Sullivan described the Elegados as ruthless, greedy, and cunning masterminds of a scheme to obtain $50 million in home loans for unqualified buyers by falsifying job and salary information on applications. The defendants were pocketing at least $40,000 a month in commissions, and they obtained loans exceeding the sales prices and profited from the excess. They used the proceeds to live a lavish lifestyle that included expensive houses and cars and designer watches and clothing—all while living a double life as respected community leaders and philanthropists.

Sullivan told the court that Eric Elegado posted photos on his Facebook page of himself posing with his ill-gotten gains—a Rolls Royce, Bentley, and Hummer. "He's standing in front of his Bentley wearing a watch that cost more than the car I drive," Sullivan told the court. "They were living an extravagant lifestyle funded by their fraudulent activities."

Both defendants admitted in their plea agreements that Eric Elegado owned and operated real estate and mortgage brokerage businesses in San Diego and that Charmagne Elegado was an account executive at New Century Mortgage in San Diego. Beginning in at least 2005 and continuing up to and including February 23, 2007, Eric and Charmagne Elegado conspired with co-defendants Theodore Cohen, Minh Nguyen, Regidor Pacal, Alexander V. Garcia, Roman Macabulos, Ramin Lotfi, and Roderick Huerto to engage in a scheme to defraud mortgage lenders in order to obtain money and property by obtaining mortgage loans, primarily through New Century Mortgage, for unqualified buyers by falsifying and causing others to falsify the employment and salary information on the loan applications and other documents.

Eric and Charmagne Elegado admitted that these co-defendants were paid approximately $500, by either check or cash, for allowing companies that they owned to be fraudulently listed on a buyer's loan documents. In addition, Eric and Charmagne Elegado agreed with other coconspirators working at Eric Elegado's mortgage companies to create fraudulent documents, such as W-2s, paystubs, and bank statements, which were submitted to mortgage lenders, including to Charmagne Elegado while she was working at New Century Mortgage. Eric and Charmagne Elegado made substantial profits from their roles in the scheme to defraud mortgage lenders.

"This isn't a case where two clever people lived in luxury for a while at the expense of banks who hardly noticed they were missing a few million dollars," said U.S. Attorney Laura Duffy. "Mortgage fraud has a long-lasting and devastating impact on our community's real estate market, and collectively, these schemes wreaked havoc on the economy of this entire nation," said U.S. Attorney Laura Duffy.

"These financial crimes negatively impact buyers and sellers in the marketplace—whether you're a first-time home buyer, someone trying to sell your home, or looking to move into our community," Duffy said. "These are serious crimes that we will continue to aggressively investigate with our law enforcement partners, and we will bring to justice those that engage in mortgage fraud in our community."

FBI Special Agent in Charge Daphne Hearn stated, "Today's sentencing signifies the continued effort of the FBI and U.S. Attorney's Office to investigate and prosecute those who commit mortgage fraud. The FBI is committed to holding those accountable who line their pockets at the expense of the American taxpayers and we hope that today's sentencing will help deter future fraud."

Defendants Cohen, Nguyen, Pacal, Macabulos, Garcia, Lotfi, and Huerto admitted in their plea agreements that Eric and Charmagne Elegado orchestrated the mortgage fraud and that each defendant played a role in executing the fraud. According to court records, Defendant Cohen, who was the chief financial officer of Eric Elegado's real estate and mortgage businesses, created false and fraudulent spread sheets, which were used by Defendant Huerto to create false wage, income, and banking records that were submitted to the mortgage lender to induce it to fund the loans. Defendants Nguyen, Macabulos, Garcia, and Lotfi were real estate and loan officers working at E Real that were directed by Eric and Charmagne Elegado to falsify loan documents and to provide those documents only to Charmagne Elegado in order to fraudulently obtain the loans for unqualified borrowers, as stated in their plea agreements. In his plea agreement, defendant Pacal admitted that he purchased and refinanced properties through Eric and Charmagne Elegado by submitting fraudulent loan documents that induced the mortgage lender to fund the loans for which he would not have otherwise qualified.

Defendants Cohen, Pacal, Macabulos, and Huerto had previously pled guilty and will be sentenced on Friday, March 28, 2014. Defendants Garcia and Lotfi will be sentenced on April 10, 2014, at 9:00 a.m. Defendant Nguyen is scheduled for sentencing in the Central District of California on August 11, 2014.

A hearing is scheduled for May 27, 2014, at 2:00 p.m. before Judge Battaglia to determine the amount of restitution to be paid by each of the defendants in this case.

Defendants in Criminal Case No. 12CR0404-AJB

Charmagne Elegado, age 47, Escondido, California

Eric Elegado, age 47, Escondido, California

Theodore Cohen, age 54, San Diego, California

Regidor Pacal, age 51, San Diego, California

Alexander V. Garcia, age 38, San Diego, California

Roman Macabulos, age 38, San Diego, California

Ramin Lotfi, age 36, San Diego, California

Roderick Huerto, age 34, San Diego, California

Summary of Charge to which All Defendants Pled Guilty:

Title 18, United States Code, Section 1349-conspiracy to commit mail and wire fraud
Maximum penalties: 20 years' imprisonment, $250,000 fine or twice the gross pecuniary gain or twice the gross pecuniary loss (whichever is greatest), $100 special assessment, three years of supervised release

Investigating Agency

Federal Bureau of Investigation

Source: United States Department of Justice for the Southern District of California